Americans love avocados. From salads to toast, we put it on everything. Before you start thinking about getting an avocado sandwich at the cafe, there’s something you should know. It’s about to get more expensive.
Ryan Monarch, an economist at Syracuse University, said there’s a reason for the guac shock. “It won't surprise you to know that something like ninety percent of the avocados that we consume in the U.S. come from Mexico,” he said. “So if you want guacamole on your sandwich, you know it's just going to be a straight up price increase.”
On January 20, Donald Trump announced that he will launch his 25% tariff on all goods from Mexico and Canada on February 1. A report from the United States Department of Agriculture revealed that more than one third of all vegetables we eat in the U.S. are imported, and we import nearly twice that in fruit. Mexico and Canada supply between half to nearly all of those imported foods.
Monarch said the tariffs will also hit hard goods like furniture, electronics, and cars. Supply experts track those items relying on a partnership between our nation’s neighbors.
Jim Flemming, a lead researcher at the Global Institute for Supply Management explained how American auto manufacturers rely on multiple plants outside of the U.S. to make a single car.
“They have suppliers in both Mexico and Canada and in some cases the supply chain is set up where items go back and forth multiple times,” he remarked. “A series of components may be transported across a country line and assembled and then put inside of another component and then shipped back to a different factory.”
In fact, in research by the Brookings Institute, it found an American car crosses borders an average of 8 times during the production process.
With tariffs in place, Fleming said bluntly, “the harsh reality is those costs must be absorbed somewhere.”
On the other hand, many people making the parts embrace the tariffs. Scott Paul, for example, is the President of the Alliance for American Manufacturing. He looks out for steelmakers, and fondly remembers back in 2019, when Trump put targeted tariffs on steel and aluminum imported from China.
“I did not see the doom and gloom,” he said. “I see a healthier steel and aluminum industry, I see metal consumers who are mostly hiring, and I saw a lot of stability and optimism which I had not seen for a very long time,” he recalled.
In his eyes, and as the Tax Foundation found, those tariffs led to more steel jobs. However, that same research also shows jobs shrank as costs went up in sectors using steel and aluminum products to make cars and other machinery.
The difference between those 2019 tariffs and today’s is that Trump originally targeted tariffs toward specific materials. Monarch explained that this time around Trump is proposing blanket tariffs. “You should think of it as raising the price of all of the things that the US imports,” he explained. “It doesn't matter where it's coming from. It doesn't matter what the product is.” And when prices spike all at once, he added, “we should expect to see an inflationary shock.”
Paul, a self-described tariff hawk, countered that the supposed surge gets broadly distributed. “Those tariffs get absorbed throughout the supply chain,” he said, and added that “manufacturers look at other ways to become more efficient…which ultimately would benefit the US economy overall.”
In other words, many companies choose to shield their consumers from the price shocks. However, when observing companies, Fleming noticed a different pattern.
“Corporations are generally going to do a pass-off of that particular tariff or increase in price…on to the consumer,” he said.
It leaves many businesses with a choice: do they bear the bite to their budgets or let consumers carry the cost?
It’s a choice especially facing many small businesses. Keri Bannon buys furniture for Dunk & Bright, a furniture retailer based in Syracuse. Because most of their furniture is imported, she said, the costs will have to be absorbed somewhere.
While the company can eat some of the costs up front, she explained, “If every vendor does a 25% tariff, we'll have no choice but to raise some of our pricing, which we don't want to have to do.”
Many of their suppliers have urged the company’s owner, Joe Bright, to purchase more supply before the tariffs hit. However, he remains steadfast.
“We won't do that because it’s kind of just speculating,” he affirmed.
Having heard all of the arguments for and against tariffs, Monarch pointed to the multiple opinions as a sign, “There is a lot of uncertainty about what these tariffs are actually going to look like,” he conceded.
To Fleming, it comes as no surprise. Although he has focused on supply chains, he didn’t see them as the real target of the tariffs. Rather, “it’s a bargaining chip,” he asserted. “It's a starting point for negotiation to try to find a better situation.”
If, ultimately, Donald Trump follows through on his threats, Monarch said he can safely predict that those 25% tariffs will show up when purchasing future laptops, cars, even avocados for sandwiches in the future.